Silence can be binding

An invoice arrives in the mail. It’s from your equipment supplier. But you are involved in a bit of a disagreement with the supplier and you ignore it. A month goes by and yet another statement is in the mailbox. Once again you decide to ignore it. Certainly by now the supplier has gotten the message! Six months later, a process server is standing in your office lobby, asking you to sign ...

12/01/2006


An invoice arrives in the mail. It’s from your equipment supplier. But you are involved in a bit of a disagreement with the supplier and you ignore it. A month goes by and yet another statement is in the mailbox. Once again you decide to ignore it. Certainly by now the supplier has gotten the message!

Six months later, a process server is standing in your office lobby, asking you to sign for a complaint and summons. Your company has been sued. In the lawsuit papers, the supplier contends that your silence in response to the repeated invoices were a tacit acknowledgement of their validity.

Is there a problem with this picture? You had better believe it. The problem is a legal concept called the “account stated.”

I direct you to a New York court case from 2002. A company called Nuera Communications was suing a company called Telron. Nuera, a supplier of telecommunications products and services, contended that it sold and delivered equipment to Telron for an alleged price of $603,200. But there was a conflict on this point. Telron paid Nuera one-half of the contract price upfront, but later declined to pay the balance.

Although there was conflicting testimony on who said what to whom and exactly what was agreed, there was one fact that was not at all in dispute: Nuera had sent regular invoices showing a remaining balance due of $301,600, and Telron had not objected in writing to any of those invoices.

Agreement implied

The result? Nuera won, because it had established an “account stated” under New York law. The rule was stated by the court: “To establish an account stated, a seller must show that the parties agreed to an account based upon prior transactions between them. Such an agreement may be implied if the party receiving a statement of account keeps it without objecting to it within a reasonable time.”

The lesson here: If someone is sending you invoices for a debt that you disagree with, do not let them go unanswered!

Why does the law come out this way? It’s really quite simple. In lawyer terminology, your failure to object after repeatedly receiving an invoice signifies a type of “offer and acceptance.” The seller “offered” the view that you owe the amount in question. You signified your “acceptance” of that amount by your failure to say anything to the contrary.

Other examples

Receipt of invoices without complaint is only one way silence can legally come back to bite you. There are others. For instance, a simple e-mail from owner to integrator, or vice versa, trying to clarify an ambiguity regarding--say, the brand of actuator being used or the industrial network standard or what the security protocols are—can solidify parameters for the rest of the automation project if left unchallenged.

Another example: A contract provides that notice of a claim must be provided within 21 days after the event giving rise to the claim (a typical clause in many contracts), and the claiming party makes a claim six months late.

If the receiving party acts as if the delay in giving notice is no big deal and proceeds to request back-up information regarding the claim or otherwise processes it without saying anything about the notice problem, its “silence” regarding the notice issue may be regarded as a waiver of the requirement.

You have heard the phrase “silence is golden?” That may be good advice for many types of relationships, but can be bad advice for companies in the automation business.


Author Information

Mark Voigtmann is a lawyer with Baker & Daniels, LLP (Washington, DC, Indiana and China). His firm assists integrators, equipment suppliers and automation end users in structuring projects and resolving disputes. He can be reached at Mark.Voigtmann@bakerd.com or 317-237-1265.




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